Brisbane's subdued apartment market, which led the country in and out of the cycle, is showing signs of renewed optimism, with apartment values and rents continuing to stabilise despite low levels of new supply.
While Brisbane suffered the largest decline in new apartments, with its pipeline slumping to nearly 28,000 from about 44,900 a year, many believe the market has reached a turning point.
While the Brisbane's apartment development market hasn't completely turned a corner, the pace of decline in apartment prices is slowing, resilient vacancy rates suggested new supply is being absorbed and rents are forecast to stabilise.
There were 146 new apartments sold in the September quarter, according to property consultants Urbis latest Apartment Essentials report, down from 212 sales in the previous quarter.
Urbis director Paul Riga said that though down from the previous quarter, sales remained in line with the four quarter average of 152 sales a quarter.
“The strength of inner Brisbane’s rental market is expected to be an appealing driver in attracting investors back to the new apartment market,” Riga said.
“With currents levels of population and employment growth combined with a declining level of apartments being completed the rental price growth trend is expected to continue over the coming 12 months.”
The average sales price decreased over the quarter by $8,000 to $748,829, driven by Brisbane's inner-south which saw fifty-two percent of sales.
The inner south precinct is set to grab the largest share of new apartment completions, expected to hit 31 per cent across 2020 and 61 per cent across 2021.
The inner Brisbane rental market has continued to strengthen throughout the year, recording tightening vacancy rates and increasing prices.
Urbis’ analysis of the new apartment rental market reports an indicative vacancy rate of 0.6 per cent for new apartments.
“New apartment buildings are in high demand, and based on our discussions, building managers are seeing a high level of lease renewals and new tenants moving in,” Riga said.
“The inner Brisbane new apartment market continues to tick along, albeit at a subdued level.
“We aren’t seeing any major changes, with little movement in demand, and low levels of new supply being added.”
The quarter saw three apartment projects launched equating to 89 new apartments, down from the 467 apartments released through five new projects last quarter.
Two-bedroom, two-bathroom apartments were once again the most popular product type accounting for 47 per cent of total sales.
Over the quarter there were 22 per cent of sales in three-bedroom plus sized apartments, compared to only 13 per cent two years ago.
“Product is now being delivered to suit this market—recently built riverfront apartments are almost 100 per cent geared towards owner occupiers, whilst higher quality non-riverfront apartments are 50 per cent to 80 per cent occupied by owners.”
Recent research from Moody’s Analytics also points to a potential soft recovery, forecasting apartment prices to perform better than house prices in the medium term.